Yello Revenue & Funding (2024)

hello everybody my guest today is jason weingarten he's the co-founder and ceo of yellow a talent acquisition software a company to simplify the hiring process his vision for reinventing the way companies acquire talent has helped yellow grow an impressive client roster the software powers recruitment initiatives for the world's largest brands including 110 of the fortune 500. jason you ready to take us to the top let's do it okay so are you hyper focused on kind of fortune 500 as you know this is a very fragmented space and i'm curious if you've gained ground because of that focus um we're hyper focused on helping recruiting teams love their work that is first and foremost what we do and what we've found is that the recruiting teams at the enterprise don't necessarily have the the tool sets that they need to be truly successful um and so that's where life has taken us there are two kind of models though behind this one is that hey we need a critical hire that's the cio that's x google but also worked in oil and gas in dallas and then there's the other version of that which is mcdonald's is a fortune 500 brand their turnover is really high and then they're hiring you know a hundred thousand people a year which kind of sector are you serving more yeah so that's why it goes back to the recruiting teams um you know it's not an individual executive recruiter that's just doing like a single big fill obviously those are critical and we use them here at yellow but we we help the large recruiting teams make sure that they are more strategic and less tactical more strategic and less tactical okay got it um walk me through kind of how you price the product right so is this a pure place sas company or do you have any kind of like you know 30 percent of first year pay kind of thing so it's a it is a sas play um and we model based off of usage um we define usage as the products that they're utilizing um on our platform the regions in which they're utilizing it and uh different segments like they're using it for campus recruiting versus um lateral hires okay campus versus lateral interesting now do you do any um you said you have upsells based on features regions i assume there's some kind of upsell based off just volume of hires through the platform is that accurate usage correct that's what you define usage as okay well what if um um so usage can be a bunch of different things depending on where you put in the funnel is it number of kind of intros you send them or actual number of hired where do you put the level so usage is is often typically by volume and complexity of that volume so for instance um you know if it's a about a company that needs to have um 10 000 hires that year obviously that's going to be significant volume it may be 100 hires but they're going through 5 000 interviews so we take a look and we see where where's the place that we can make where we can provide the greatest level of efficiency and we really focus on on efficiency interesting because of the episode is short we won't go down every customer cohort but on average what would you say kind of a sweet spot is for you in terms of you know what a company might pay you per year for the tech so it really depends um and i know that's probably not the greatest answer in the world but uh we have companies that pay us in the tens of thousands and the hundreds of thousands and the seven figures yeah so it really uh again it goes back to that usage and and how we can ensure that their team is most efficient but you can look at your total customer base look at the total hires or intros you send them per year divide and kind of get an average i mean are we talking 100 a year or a hundred thousand a year i'm sorry the uh with the average error no no sorry in terms of like intros right like i'm trying to get a sense of it if it's a hundred per year or a hundred thousand pre or a million per year so and again that it kind of depends on on the customer base but uh if i were to segment it we have um some of our large enterprise that we'll look at um doing uh thousands of interviews a year we have one customer that did over a hundred thousand interviews okay and so it it it's not necessarily the intro itself um like because the recruiters will get that themselves through recruitment marketing and other focuses but it could be specific interviews it could be specific events they attend it could be um campaigns that they send so it really we like to sell to the enterprise in the way that in the way in which they want to buy yeah and um and it's usually based off what problem we're trying to solve let me ask this differently we have a lot of people listening right now that are growing their teams very very fast what is too small for you what should i mean are they talking they should be doing 100 interviews per year and spending 100 grand on recruiting kind of software what's the minimum for you so we typically look at um what we'll call a large enterprise as our sweet spot customer but uh we have customers that have as few as a 1500 employees that are utilizing the software and they're probably replenishing or growing it called 10 um from a head count standpoint and cost wise that'd be like a 10 000 acv kind of thing no we're we're a premium product so i mean uh it we don't typically work that way um so i'd consider ourselves more of a a four seasons type product of uh we're really focusing on wait so jason so what's the number this will this will save us a ton of time i'm like we're like dancing right now are we talking like a hundred thousand dollar minimum spend on recruiting kind of tools or what no i again that that depends and we don't disclose the exact pricing but uh depending on the size and scale we see uh customers that are you know called a a 50k in in that range okay we also some that started uh seven figures it really depends and that that's why if i give you an average number it's not gonna happen no i'm not i'm not i'm asking for a specific story and you're staying really really vague i'm trying to drill down on one cohort and we're still staying vague so that's what i'm trying to do is drill down on one very specific use case so what i just heard you say is there is a use case around a 50 000 acv where a team might be about a thousand or fifteen hundred people and then replenishing ten to twenty percent of that are growing ten to twenty percent of that every year is that kind of a good back of the napkin metric there it depends but i i think uh let's let's move yeah let's move on so let's put this on a timeline when did you launch the company what year launched it 10 years ago uh actually 11 now 2008. that's a hell of a year to launch a company jason what were you thinking that was the best time uh you launched when there's pain especially in the recruiting space yeah we um we got funding in august of 2008 and then uh lehman hit just uh you know six to eight weeks later holy cow hold on let we have to dive on that how much did you raise but right before lehman uh we did a million seed round okay and total today you're at what 40 or something uh around there yeah okay so million right before lehman uh no the investors have they already wired the money when lehman cloud like did they try and say hey i know we signed we can't wire this everything's crashing so here's the fun fact um uh my previous company we had sold uh just a few months prior and we did really well for it was uh fred de luca who's the founder and owner of subway um so that was the only investor there did very well for him he said to my co-founder dan and i what are we doing next we said we got this other idea and um no business plan nothing he just uh he wired us the money that's funny okay good so you had the money then it crashed then what what happened um then it was uh instead of building software for specific customers where that can go wrong uh we built it based off what we thought and knew to be true in the space and it gave us i didn't realize this at the time obviously like you're selling recruiting software in the middle of uh uh companies not recruiting yeah yeah it's uh it's different but it gave us uh you've heard me say the word efficiency a number of times it gave us the ability to work with some of these big brands that we're still hiring um and we didn't have competition because no one was crazy enough or funded to to be able to go after that segment so i i think it gave us a three or four year runway that we've then utilized to create scale interesting you mentioned in the bio you gave me i think 110 of the fortune 500 but how many how many logos how many brands are you working with today total uh we're working with several hundred companies now um and uh one of the companies is a large rpo and they work with uh several hundred themselves so um we're probably about 600 total um large organizations that are utilizing our software and why is this space the specific space of urine so fragmented i mean gut or instincts would tell you that there would be consolidation there would be roll-up but i mean i've interviewed probably 15 people in this space why is there some all with more than maybe 10 million bucks in ar all right why is it so fragmented um i think if you ask me that question in three months it'll be a very different answer who are you acquiring right now uh more opportunities to uh buy organizations in probably the last three months that i've seen in the last five years and um we're bigger so i mean that's part of it but um there is a lot for sale right now um and it's exciting as a as a company that we've been able to establish our own um space there so going back to the original question of why do i feel that is there are lots of point solutions that you can get to 3 million of ar 5 million america 10 million of error but then you grow one year from 10 million to 11 and then all of a sudden funding runs out and so getting to that next level i think uh takes a a specific type of culture it takes a specific type of long-term investor and uh it takes a uh to me a vision that is not just by the the founder but by a lot of really smart people and so we've seen a lot of uh companies not just in the recruiting space but in call overall enterprise sas try to get to 10 to 25 and that's where uh a lot have fallen short are you you guys are past 25 at this point is your next big target like the 50ish range yes how do you the reason i ask that because if you've raised 46 i mean you gained significant i've just sensed it's a back of the napkin thing but i've since founders typically gain a ton of leverage once their ar to funding ratio is about one to one uh they tend to then go out and potentially raise additional capital at that point or just keep accelerating revenue past the total amount they've raised um let me let's say you find something that you really want to buy but you need more cash how would you choose to fund that would you do it and just raise another round of funding internally yourself or do venture debt or what um that's a great question so we have a decent cap table right now so it depends on uh the size you know if it's a a deal under 10 to 15 million that's probably something we wouldn't go and bring another group to the table if it's a larger acquisition and something we view to be extremely strategic not just a product or a team then you know we leverage the expertise of our board who've been there and done this many of times to figure out what's best based off of the conditions at the time right now there are more opportunities than ever before whether it's private equity internal uh venture debt um just using credit line so there's a lot of opportunity right now that i don't believe existed our last tiny acquisition seven or eight years ago yep would you i mean look there's also big companies like vista equity that just raised you know 14 billion dollars they've got to figure out how to deploy the capital you're potentially interesting target for them right they're paying six seven eight x on average i mean would you would you go sell to a vista um you know i think we would look at uh at any private equity firm this has got a nice position in on isims in the ats space and they've um uh obviously they value recruiting so we want someone who's looking at recruiting and understands it um but yeah i mean and k1 just did a big deal um earlier this week with um you know a bunch of smaller players but um yeah i mean we would i wouldn't turn anyone down that's uh looking to help us grow yeah it's funny colin comes on the podcast and i go colin are you in any talks right now to sell to vista and he looked at me no no tell any no nathan no we enjoy staying prep okay i didn't refresh techcrunch like a couple give me three months later right because this was recently and it's like this you know goes into ice and i'm like colin come on man you couldn't give me the breaking story here but look vista's playbook is buy the hub or sometimes buy the spokes and then buy the hub and this is a very interesting play with you and i sims together you know colin built that thing bootstrapped to basically 120 130 in arr it was a really impressive story um so good okay this is helpful to understand how you're thinking about m a um how are you what back to you no no go ahead how are you how are you guys what oh i thought you said how am i thinking about mna no no i said i love how you think that was helpful understand how you're thinking about mma yeah yeah um tell me a little bit more about growth rate so if you're you know sub or sorry north 25 today where were you about a year ago um so we uh we've been growing very steadily we don't disclose specific growth rate um but i think it's better told through headcount um to show how we're investing and so um a year ago we were at a 150 employees today we're at 209 we still have um almost 40 of the businesses in product and engineering so we still believe heavily that there are additional products and additional enhancements our products that will um uh create an additional uh addressable market um we're still growing in what i would consider the hyper growth phase i mean by the way i would put that above 50 year over year at your scale is that fair to say you're above between 50 and 100 and we don't disclose that specifically but from uh um i mean we did hire 93 people last year but jason my audience is smart you know what they hear when they hear you hire 93 people they say well yeah he raised a bunch of money and now he's just burning more cash that doesn't mean growth was there um i i appreciate your audience and i again i we don't disclose specific growth rates but we do we've hired very methodically and and our investor base isn't one that's just going to sit there and throw money at people they don't feel the opportunities yeah but it happens all the time i mean eero you just saw today taking out yesterday by amazon they'd raised 100 million bucks i mean he came on the show and basically said the same thing yeah we've troubled triple headcount we're growing really fast well no revenue was not growing like it should have been growing at a venture backed company and and obviously didn't didn't end up working out so well for really any common holders um so i mean let me maybe ask this differently where you feel like you don't have to give up any sense of information um over the next 12 months what will you like what would you like to see growth rate be you don't know what it's going to be what would you what would make you really happy to see growth rate wise um we would always want to stay above uh we would want to stay somewhere between in the the 25 to 50 range okay fair enough fair enough uh a good group for us um i'd be uh disappointed if we got into one of the traps where we're not growing strategically yeah one of the other things that we do consider here is rule 40 or rule of 50 and so um we're thinking about it that way as well and just be clear because some people measure this a little bit differently rule of 40 rule of 50 is essentially taking ebitda free cash flow plus growth and making sure that that's above 40 percent correct yeah um that's great and by the way also i shouldn't i shouldn't hit you so hard here because we have no idea in terms of ar what you're at i mean if you're at 40 right you said between 25 and 50. but if you're at 40 right now going 100 year over year is really challenging 25 to 50 is still what may be hyper growth for that level so um so all good there now where do you think most the the growth is going to come from expanding current logos or adding new cohorts all together uh expanding current logos really interesting okay so are you going to go i mean do you do this through buying a company and then up selling that product across your base and sorry i i misspoke there to me it's a expanding uh with the same type of product uh two new logos new logos okay yeah we still um uh when when jmi invested us um they looked at their cohort of uh of companies and um everyone's got like an x factor our x factor was uh net retention so um that is something that we are able to grow the base because uh they're able to see value we're able to save them money they're then up sold to additional products um based off of their requests and and their usage and we'll continue to grow that way but we do believe it's going to be primarily through new logo expansion i mean i would say to have really have net revenue retention where it is a key kind of differentiator where you have hit on something that's really special i mean you gotta be talking like 140 150ish percent annually is that kind of what you're seeing um when jmi invested we were um we were near there okay yeah that makes so just to be clear that's your expansion revenue from the same code a year ago more than outgrew any churned revenue by a function of 40 or 50 percent uh closer on the bottom side of that but yes okay no no but i mean that's that's impressive now have you built the internal sales team that's incentivized to drive expansion like did you give your do you give your customer support people uh commission for example so we have a csm team that is in charge of um of retention not of uh what i'd call meaningful upsells okay um a sales team that's very experienced that will if there are new opportunities and new products or new expansion opportunities they are incentivized to um to help our clients achieve those those goals um last question here on just how aggressive you're being right now so you know what is it i mean you can either i'm curious either fully weighted cac or we don't want to talk about that per kind of customer um how you know what are you willing to spend right now to get a new dollar of ar um so we're we're chicago based and so uh for us we might be a little bit less aggressive but um you know we we still are really comfortable with um anything uh uh we like to stay close to a dollar okay um dollar and dollar out 12 month payback uh in first year yeah um but you know for for us uh um we have opportunities to be more aggressive it's more of a uh adverse growth right so yeah is your is the board going listen jason just push to like a dollar twenty or dollar thirty we can go up to 18 month payback and still be fine they they uh in certain cases they'd like us to see us be more aggressive in sales and um in certain case they're probably right um but you know it's we also want to make sure like our marketing teams hit in the right vein of course and uh um and we're not uh the last thing i want is uh we're not getting enough leads in based off the number of sales people to make sure that the sales people can be successful so let's wrap up here with the famous five number one what's your favorite business book oh that changes every day um my my one right now uh wow that's a great one is i'll go with culture code yep that's a good one number two is there a ceo you're following or studying right now yes um i would say the the main ceo i'm looking right now is uh uh i i like everything that um uh aaron stunned at uh pluralsight number three what's your favorite online tool for building the company online tool for building a comment it's gotta be gmail right hey if that's your go-to all right number four how many hours of sleep to get every night i just read a full study on that you need over eight hours and uh unfortunately i'm right around six okay well that can be approved upon right all right last last question here um what's your situation married single kiddos um i am uh divorced two kids uh eleven and eight gigi and dylan uh they're both amazing and how and how are you jason uh 41. all right take us home what do you wish your 20 year old self knew um a lot i would uh the the one key thing is that uh uh life is neither as good as uh great or horrible as you think it might be at that time and um things uh things tend to work out if you uh stay focused guys it's never as good or bad as you think coming from jason founded a yellow again making recruiter team recruiting teams more efficient working with over 600 customers right now north of 25 million bucks in ar growing me wants to be growing kind of 25 to 50 percent year over year 46 million dollars raised 209 people net revenue retention north of 100 back when jmi invested it was call it north of maybe 140 130 percent right now he's being conservative caught a dollar in to get a new dollar out in terms of ar for a 12 month payback period but that might change as they look to scale jason thank you for taking us to the top appreciate it thanks for your time